Reviewing My Digital Notebook

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  • on March 3rd, 2011

The reason I started blogging was to help clarify my thoughts, as there is something about writing that forces an extra look.  On top of that, my thoughts are now recorded for review by anyone…most of all, myself.  After years of accumulating notebooks full of cryptic passages, at least now my thoughts have a sense of organization and the ability to search for certain words and phrases.

After having a decent feel for things over the past few weeks, I fell into “amateur hour” status over the past couple of days.  That happens to all of us at times, and assuming good prep and health I can usually pin those episodes on one of the following:

1) Misapplied Time Frame- focusing on a swing selloff but failing to acknowledge longer-term support, or vice versa

2) Misapplied Style- executing a “follow” approach when the market has switched to “fade” mode, or vice versa

Using the archives I so touted above, let’s review the following graphic I shared last summer showing how I use the % of stocks above their 10 Day moving average for context:

In writing that post, I felt I had covered the subject and moved on to something else.  In reviewing my work this week, I decided another dimension should be added to complete the thought.  Not only do I find value in breaking the market into a Buy Stocks vs. Short Stocks vs. Trade Indices bias, but being aware of the style of buying or shorting is critical.  A market with 35% of stocks above a flat 10 Day average is not the context in which I should favor buying breakouts…see my buy of $IYR this week for a great reminder of what NOT to do.

Coming into today, I show 33% of stocks above their respective 10 Day averages.  That’s up from 24% on Tuesday but down from 46% on Monday, so it generally indicates chop inside the lower half of the spectrum.  The longer timeframe shows a strongly rising trend not likely to disintegrate at the first test, so shorts have limited legs for now…leaning long is fine assuming one respects the prevailing style.  That means buying bases, not breakouts.  Or if one is focused on breakouts only, stick to groups that are sustaining breakouts like micro caps particularly in energy and metals.

Whatever your approach, just keep recording your thoughts.  You may decide to keep those thoughts private, or you might decide that the accountability and forced clarification helps accelerate your development.  Despite being a private person, I’ve found tremendous value in sharing my thoughts.  Trust me, it’s a lot easier to plug “% Above” into my search tab than to go rummaging through old notebooks!

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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